Mulberry: a luxury leather goods retailer that is lacking identity.
Introduction
The appearance of several new adverts near where I work, as well as an event I attended at one of their nearby shops has pushed me to take another look at Mulberry. Their share price has increased slightly from where it was when I last researched the company, but it remains significantly below where it used to trade, although admittedly not without reason.
Mulberry is a luxury leather goods retailer based in the UK, manufacturing the majority of its products in two factories in Somerset. It became known for classics such as the Bayswater, which were very popular in the 2000s and allowed the brand to create a strong foothold in women’s handbags.
Since then, the business has struggled. Price increases aimed at repositioning the brand at the upper end of the luxury market have led to a lack of real identity. The focus on generating sales in foreign markets, particularly China, has also caused the business to neglect its core UK market, damaging its British brand identity at the same time.
Unfortunately, despite liking the business, the new CEO, and the new strategy, I have been unable to make this one work from a valuation viewpoint. I looked at multiple scenarios for the business, but the leaps of faith required for the business to even justify the current price are sadly too great. Perhaps this would be the case with all turnarounds, but it is my aim to find companies trading below their expected value, and an investment in Mulberry felt like a bit too much of a hail Mary.
In addition, luxury brands represent a very different form of investment to the other companies I am invested in. Their pricing power and subsequent high margins depend on the strength of their brands. By nature these are more difficult to quantify, and I do not see that I have the expertise in the case of Mulberry to make decisions about the quality of their current campaigns and the potential popularity of their future products.
Why the opportunity exists
Cumbersome business – Mulberry has grown too fast in too many different directions according to the current CEO. Whilst revenue has declined only slightly, operating expenses have ballooned over the past 5 years.
Macroeconomic headwinds – There are macroeconomic factors that are affecting the luxury goods market more broadly, in particular lower luxury goods spending in China has had a significant impact on Mulberry.
Loss of brand identity – Once seen as a British cultural icon, Mulberry has lost its brand identity. This has been through a combination of underinvestment and lack of creative direction, both of which the company is seeking to rectify.
Decline in UK revenues – Pre-pandemic, the UK made up 71% of group revenues; since then, this number has declined to 57%. This decline in revenue is indicative of the brands loss of identity in its home market.
Investment Summary
New CEO – Ex Ganni CEO Andrea Baldo was appointed as Mulberry’s new CEO in September 2024. Ganni’s performance during his period in charge was extremely impressive but given the strength of the leadership team around him and the entirely different nature of the challenge he faces at Mulberry, it is difficult to draw too many conclusions. He seems to be a thoughtful leader however, and his new strategy gets to the heart of a number of the issues that I believe Mulberry has.
New strategy – Baldo conducted a full strategic review upon entering the business, identifying the areas that needed to be addressed. Since arriving he has dramatically reduced headcount, refocussed areas of the business that were too complicated, redefined the business structure, put creativity at the centre of decision making and launched new brand initiatives to rebuild the brand’s relevance in its home market.
Entry to luxury price point – Mulberry is positioned as an entry to luxury brand, with some of its bags costing close to half the price of its peers. This represents an opportunity for the brand to take market share during a period where consumers are more price and value conscious, and in doing so reclaim its market positioning.
Return of the ‘it-bags’ – The returning popularity of what were referred to as the ‘it-bags’ of the noughties is driving growth in Mulberry’s heritage bag category, particularly the Bayswater. With sales of the Oak Bayswater up 30% in April 25 and searches up 225%, there is clear indication that demand for these vintage bags remains strong.
UK production – Mulberry produces around 50% of its bags in two sites in Somerset. Whilst the cost of producing products is difficult to justify from a cost point of view, it does have the potential to allow for faster development and prototyping of new products, giving the company an advantage in terms of speed to market.
New, ex Ganni, CEO
New CEO Andrea Baldo, replacing the outbound Thierry Andretta, was previously the CEO of Ganni where he oversaw rapid growth and outstanding business performance. Given that this thesis is a turnaround play, it rests almost entirely on the quality of the management team and their ability to refocus the business on what is important.
He began his career as a strategic consultant at Bain & Company before moving onto top managerial positions at Diesel, Marni, Coccinelle and finally Ganni. From reading and listening to interviews he seems to be a really thoughtful leader. He understands the importance of hiring the correct people and invests a lot of time into developing them and their careers. He also talks a lot about the importance of nurturing creativity in organisations, putting a lot of focus on the value of culture when running a successful business.
Looking back at his most high-profile position as CEO of Ganni, Baldo took the helm in October 2018, holding the position for 5 and a half years. During this period, he oversaw impressive business performance, with revenue growth regularly in excess of 30%. His success at Ganni was centred around maintaining a culturally relevant brand, with a strong focus on sustainability.
That said, the position is starkly different from Mulberry, with revenue growth for the three years prior to 2019 all above 50%. He also had a strong creative team around him, with both of Ganni’s founders still working alongside him at the business. Mulberry therefore represents an entirely different challenge for him, and perhaps the reason he decided to move away from Ganni.
He has made strong moves so far, cutting 85 of its London head office roles in an attempt to create “a leaner, more agile organisation”. He is also conducted a full strategic review of the business, identifying the need to restore the brands relevance and cultural identity. These initiatives seem to be the right ones for me, and he appears to have the backing of the board to make long-term decisions for the success of the business. We will look at his new strategy ‘Back to the Mulberry Spirit’, in more detail below.
New business strategy
Mulberry’s new strategy, ‘Back to the Mulberry Spirit’, was released in January of this year. The focus is on returning the brand to its original values, and in doing so bringing the business back to sustainable profitability and drive long-term value creation. To do this, the company has set three strategic priorities.
Simplify the business for disciplined execution – Within this, the strategy focuses on four key areas:
Markets: the company is aiming to refocus the attention on the UK, accelerate growth in the US and de-emphasise the Chinese market.
Channels: Develop a channel agnostic growth strategy, re-prioritising wholesale and right sizing the store estate.
Operations: Improve areas such as cost control management, supply chain agility and operational efficiency.
Product & Pricing: Create a more focused product offering and price range, reducing the promotional dependency.
Leverage insights to deepen connections and drive demand:
Improve insight capabilities: Enhance customer insight using CRM tools and AI powered data platforms.
Customer personalisation: Tailored offerings to unique customer personas and incentivise sales teams to drive improved retail performance.
Reactive and agile operations: Implement quarterly drop structure to align with market demand and improve seasonal replenishment.
Realign Mulberry’s identity as a British lifestyle brand and reinvigorate its cultural relevance:
Brand positioning: Re-position the brand to celebrate British lifestyle, balancing heritage with cultural relevance to appeal to global audiences in a unique way.
Lead with creativity: Creativity is the key factor in reigniting the brand image, with a new brand director to oversee the creative studio.
Activations and marketing: Investment in marketing, boosting brand desirability through partnerships with influential talent and by utilising fashion shows.
I think that the combination of these three factors has the potential to be very successful for Mulberry and identify a number of the weaknesses that the business currently has. Focusing on home market sales initially provides the potential for an early win for the company, with the ability to build out once they have developed this stable base. UK sales remain significantly below pre-pandemic levels, with the opportunity to drive growth in wholesale and outlets fitting well with the current macroeconomic weakness.
Source: Mulberry Strategy Report 2025
Mulberry has struggled in recent years with a slightly confused product offering. The challenge of maintaining the core heritage product offering whilst driving sales through new product releases has left the brand straddling an ineffective middle ground. Re-focusing the offering and pricing strategy is therefore essential but will be difficult for the brand to execute effectively. Releases of new products such as the Soft Bayswater, which maintains many of the original features, is an effective may for the brand to achieve this.
In terms of deepening customer connections, there is not too much to say on this aspect of the strategy, mainly because I don’t know the extent to which this was being done before. Improving the agility of the business to allow it to react more quickly to cultural trends is certainly an area that needs improving. The company’s own manufacturing also provides it with an advantage over competitors in this area, where vertically integrated design, development and manufacturing allow for a much faster end-to-end process.
Finally, re-establishing Mulberry’s brand identity is probably the most important aspect of the strategy, but also the most difficult to track. There has been a noticeable increase in the number of adverts that I have seen recently, although this could just be a form of cognitive bias.
The decision to create a new ‘Creative Studio’ function at the centre of all brand touchpoints should also help to drive consistency across the brand. This new function will encompass everything from new product design to store window layouts, ensuring a seamless experience for customers. The creative director will also report directly to Baldo, ensuring that branding is at the centre of the new business.
A return to the ‘entry to luxury’ price point
Back in its heyday, Mulberry was positioned as ‘affordable luxury’, and an entry point into the luxury handbag market. Then CEO Bruno Guillon, made the decision to increase the price point in an attempt to target wealthy Chinese, Russian and Middle Eastern shoppers. By increasing prices, he hoped to change people’s perceptions of the brand and move it more in line with the leading luxury brands.
The price increases took place between 2010-2014, with many in excess of 50%. As an example, the Alexa cost $1165 in 2010, but increased to $1845 by 2014, an increase of over 60%. These price increases alienated the UK customer base and failed to have the desired effect of repositioning the company alongside the other leading brands.
Prices were reduced significantly by the prior CEO, Thierry Andretta, with the introduction of what it called a ‘democratic’ pricing strategy. 70% of handbags were priced between £500-£995, compared to 50% in 2014. They also released new affordable ranges such as the Tessie collection, with bags priced from £495. Whilst this had the effect of stimulating sales, the lack of accompanying ad-spend meant that the effect of this was short lived.
Mulberry believes that the significant price increases from other luxury brands during the past 5 years creates ‘white space’ that they can exploit. By not increasing prices in line with their peers, they believe that their bags are an attractive proposition for increasingly price conscious customers.
Source: Mulberry Strategy Report 2025
The company sees this as a significant differentiator, with some of their bags almost half the price of comparable offerings from other brands. The company will also implement a flexible pricing policy, with market specific pricing strategies depending on the location. Baldo
Revival of British It-bags
Vogue ran an article recently about the revival of the noughties it-bag, with the prediction that the Mulberry Bayswater would be next. According to Mulberry, global sales of the Oak Bayswater (a popular style from the period) were up 30% in April 2025 compared to the same period the previous year. They also said that searches for the Bayswater were up 225% in February 2025, with the increased demand outstripping the current supply.
Far more investors must be Vogue readers than I would have expected, because the price jumped significantly on the release of the article. I think this is also the first time that I have received financial updates about a business from a fashion magazine. The increasing popularity of buying used, or pre-loved, bags means that these popular vintage models are likely to stay relevant for longer. Predicting these cycles is challenging however, but the added revenue streams for heritage lines, if combined with successful new product launches, has the potential to be a very effective strategy for the business.
UK production advantages
Mulberry operates two production sites in the UK, both of which are based in Somerset. These sites are responsible for producing around 50% of their bags, with the rest manufactured in places such as Vietnam and Turkey to keep costs down.
Baldo has already confirmed that keeping these sites is ‘non-negotiable’. The challenge therefore becomes how to make them viable given the much higher labour costs in the UK. He sees the advantage in faster end-to-end development and prototyping, enabling them to be more creative. Once the design team has come up with an idea, the production team are able to test how the bag will perform on the production line, before it is produced offshore. Given that Mulberry intends to be more agile in responding to new trends, this has the potential to be a significant advantage for the company.
It is also a brand differentiator for the company, and one that Baldo intends to lean on heavily. Their most recent spring 25 campaign was based at their Mulberry factory, with the raw shots synonymous with Baldo’s belief that a modern fashion brand should be unflinchingly honest with its customers. Leaning on its British manufacturing heritage is likely to resonate deeply with its UK customer base, linking well with the company’s sustainability targets.
Risks
Continued macroeconomic weakness – Given that this is a luxury goods brand, albeit one at the bottom end of the scale in terms of price, it is still incredibly sensitive to changes in consumer confidence. A protracted period of economic uncertainty, such as the one we are currently experiencing, is therefore likely to lead to reduced spending in the luxury goods market and continued pressure on revenue for Mulberry as a result.
Change in attitude towards leather goods – Leather goods can be unpopular with some consumers, both from an environmental and animal welfare point of view. Despite this, the market has been growing and is forecast to continue to do so. Further changes to the perception of leather could impact the sale of Mulberry’s goods, but as this is yet to happen, and leather is seen as a durable and attractive material, I think this is unlikely.
Changes to National Insurance contributions – This one is less of a risk and more an issue, the effects of which we are yet to fully see. Mulberry employs around 1400 people globally, with the vast majority based in the UK. They are therefore going to feel the effects of the increasing NI employer contributions, although we won’t know to what extent exactly until further down the road. The company’s significant headcount reductions should mitigate some of this risk.
Valuation
Sadly, this investment has fallen at the valuation hurdle. I looked at multiple different scenarios for the business, but I was unable to achieve an expected value that was underwritten by a set of realistic assumptions.
As I mentioned in the introduction, it is possible that this is the case with most (or all) turnarounds, and what matters more is belief in the incoming management team. For me however, I prefer to be able to make what I see are reasonable estimations as to the future performance of a business. Whilst a certain degree of uncertainty is essential in creating attractive opportunities, too much undermines the confidence I would need to make an investment.
My base case scenario assumes modest, below 5%, revenue growth. In this scenario margins improve slightly, with ROIC also improving over the course of the explicit forecast period and ending above the cost of capital. My bull case scenario reaches nearly 10% revenue growth, with strong gross and operating margin expansion. Required re-investment is below historical averages and subsequent ROIC climbs to nearly 30%. The bear case scenario is rendered useless by the fact that it creates a negative equity value, so I have put its probability at 0%.
